The future of farmers

Hot on the heels of the Irish Farmer Association’s (IFA) launch on its submission for Budget 2014, AgriLand interviewed IFA President John Bryan this afternoon in the busy lounge of Buswells Hotel.

A beef farmer from Kilkenny, the farming president talked rural development, college grants, CAP, horsemeat, fodder, cattle prices, financial debt, young farmers and all things dairy and export.

Budget 2014 Submission“We have had very tough weather in 2012 that did hit farm incomes last year and resulted in higher borrowing for a lot of farmers,” Bryan said. “The first four/five months of this year were very topical and with very low temperatures and low grass growth this has resulted in increased feed bills and extra costs for farmers.” He acknowledged the weather has made “a huge improvement during June and July giving farmers the opportunity to catch up on a lot and store as much hay as possible”. He said there are still substantial debts on a lot of farms and additional grants cuts or tax hikes would hit farmers considerably. “Cuts that have been applied to the agriculture budget for the past number of years have hit farm incomes very hard, REPS, suckler cow, all those areas. It has had a huge impact on farm incomes. The government needs to take this into account in Budget 2014.”

EU Rural DevelopmentThe IFA is calling on 50/50 draw down of EU rural development funding, which it said, is key for job development in the sector. It claimed 15,000 jobs were created in the agri/food sector alone last year and support is needed for this to continue. “The Government must take into account the new EU rural development funding that is available for agriculture, in the budget decisions for 2014. Under the proposed Rural Development programme 2014-2020, an average of €290m EU funding/year will be available directly for farm schemes. This is an increase of more than €100m on the EU funding that was available in 2013. This funding will be available at no additional cost to the Exchequer, and must be directed towards schemes for the farming sector in 2014.”

The IFA President continued: “Agriculture is the only sector to generate a significant level of EU funding, the continued rigid adherence to a reduction in the gross ceiling in the agriculture budget for 2014 is totally unacceptable. The Government must ensure that the increased EU funding that is available.”

Weather, fodder & financial debtIn terms of fodder stock, Bryan said it was still a concern and claimed the major co-ops are carrying substantial debt up to 30 per cent compared to last year. “Most farmers like to have a little reserve. Any reserves that were in the country got sucked in last year because the winter started early and it was a wet summer. There were a huge amount of farmers in different parts of the country that maybe had a little bother that redistributed to other parts of the country. There was a lot of moment in the end where fodder had to be imported. So there was no hangover stocks where normally there would be, a lot of farmers would have a lot of hay or silage. That’s gone. The weather since in took up in June and July, a lot of silage was made. But the yields were down, the quality was high-dry matter, but a lot of hay was made.”

In terms of the hot weather conditions the past two weeks, Bryan said: “There was bit of a drought at the moment but if the rain comes this week, the more grass there will be and late cuts. If the drought was to continue for another month or another six weeks then naturally enough people would end up using some of the hay during the summer, which we don’t want to do.”

Overall he noted a growing debt concern. “One of the big concerns we have, we have met all the co-ops the past couple of months, Dairygold, Glanbia, Kerry, they all say they are carrying substantial 25-30pc more debt on their books compared to last year. It is the very same in the merchants, the banks are carrying a level of debt that will have to be worked on.

“If you have stable commodity prices this year, the milk price is up nearly 20 per cent on last year, cattle prices are slipping a bit at the moment but we will put a bit of pressure on, if the weather comes right over the next few weeks, a lot of extra fodder will be made and that will help for next winter.”

Mean Testing College GrantsThere is no logic to depriving any sector with access to third-level education, the IFA President insisted. “I know the country is going through severe pressure and we have had a lot of tough budgets but if you have a farmer who has a very low income and might have a reasonable sized farm, depending on the product mixed he has or the enterprise he has or the atrocious weather and with no income, to say to his children cannot go to school unless your father sells a few fields or something, the reality is the bank will not loan you money. The banks have a very real rule, your capacity to pay and if you haven’t an income and haven’t the capacity for repayment they will not loan you the money. So those family children would not have access to college.” He said for a very low income farmer to generate repayment capacity would be impossible. “It would be absolutely impossible to take capital assets into account and discriminate the agriculture sector,” he added.

CAP Reform DealIn view of the huge economic pressures out there to secure a budget of €214bn for Pillar I and €313m for Pillar II for the next seven years was a good economic achievement overall, he said. “In our meetings with the farm organisations in Canada and America, there Governments have decided to substantially reduce their contribution to agriculture in light of the economic crisis. We were always concerned about any shift away from active farmers. Very clearly we said in a limited budget that we have there is a reduction in the budget but on top of that there is redistribution and clearly it has to be targeted.”

The IFA President said while the overall budget deal was a good deal in the current economic climate there are farmers who have substantial borrowings invested in their business, and they are going to take cuts of between 20 and 35 per cent between in 2013.

“The first cut for farmers this year is five per cent. that is a cut that is going to be difficult to make up in the market place because rising cost, feed was rising, fuel was rising, fertiliser was rising, putting a lot of pressures on farmers. At the same time to have a cut in the single farm payment was going to pressure on individual farmers, that might have a substantial level of borrowing on their enterprise.”

The ongoing reduction in the price of cattle

Meat Industry Ireland has defended the reduction in the price of cattle for the past number of weeks, claiming Irish cattle prices are still almost 110pc of the EU average. The IFA President dismissed this claim.

“There are two issues here. 110 per cent of EU price takes into the basket 27 member states. So if you have countries like Romania, Bulgaria, Poland, countries that don’t sell to, it skewers the statistics. If you only put in the countries that we sell to, Ireland, England, Germany, France, Italy and Spain. We don’t sell beef to Romania or Poland and their product is not seen as a quality product such as Ireland. We have invested substantially in meeting the highest standards welfare, environmental and food hygiene standards quality assurance and built up a suckler heard of over a million.”

Byran claimed the meat factories take every opportunity they can to pull prices. “It is always quiet noticeably that never one of them does it on their own, they all do it together, mysteriously, I’m not sure why now.” He continued: “It’s very clear if you study cattle prices over the past two, three years it is a statistic that stands out that they all seem to pull at the same time. Sometimes they say it is the market and of course sometimes it isn’t, if something dramatic happens that affects the market. But more times, like very little has changed.

“The main market that we are selling into where 55 to 60 per cent of our beef is going, and another 10 to 12 per cent in the Irish domestic market. Between the two of them, certainly nearly 70 per cent of the beef is being sold into two very high priced markets and then the other 30 per cent is being spread around between Italy, Spain, France, Germany that would not be anywhere near the bottom the EU average.

The president said the IFA is having a showdown meeting with the major meat industry factories next Monday morning to discuss the matter further.

The horsemeat scandal, lessons to learnAt times like the economic crisis you have to learn lessons from it, the same applies for the horse meat scandal, the IFA President said. “With the whole horse meat saga, the lessons to be learnt was that there wasn’t enough inspections in any secondary meat processing plants. There wasn’t enough openness and transparency,” he claimed.

“We have asked the Minister for Agriculture to make a few substantial changes. We want to put extra inspectors into secondary meat processing plants. Some of that has happened, Silvercrest Plant has re-opened under new management and is subject to Department of Agriculture inspections, which I believe should be in all secondary processes.”

Bryan said the IFA has asked the Department to put information on who is purchasing imported products on its website on a weekly basis. “So that it would be clear for everyone. Now that has not happened. We have further meetings with the minister where we feel clearly that if everyone purchasing, be that Polish meat from a trader, should have that information. Any farmer in Ireland can press a button and find out how many cattle are in a herd, full disclosure, age, when they were born.

“We should have the same access, what factories, what plants, what processors are importing meat, what percentages and make sure that when imported products are brought in that it is sold out as imported product. At that level I believe there is a need for further tightening up.”

He said at farm level there is full transparency. “At primary processing it is good. So when you are dealing with muscle and where the animal is slaughtered. It is where you go to secondary processing that the level of accountability is not accurate,” the IFA President claimed.

“There is also a need for tighter meat labelling at the moment the regulations states all muscles have to say country of birth, where it is reared and where it is slaughtered. That should be on all cuts, not just muscle. So if someone decides to produce a pie and put meat from six countries into it, they should be made put disclose that and that is not happening at the moment.

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He contained: “Certainly we need tighter labelling legislation, more inspections at secondary processing and greater transiency on those importing products being used. We submitted details of this to the Department of Agriculture and I made a presentation on this to the Oireachtas Agriculture Committee but very little has happened. The one area is a little bit of extra inspections on secondary processing, but more inspection is required there.”

With regards to possible criminal prosecutions, the IFA President said: “When it comes to criminal prosecution cases, that is something the gardai have to deal with, I presume they are following the laws of evidence in Ireland.”

Dairy post-quota and the finance challengeAccording to the President, Finance is one the first major challenges facing Irish farmers post-quota.
“All expansion requires finance for infrastructure. So the first thing you are taking about is more sheds and housing is expensive. I am only back from a trip where we met Canadian trades and talks going on about with EU traders at the moment and we met the Americans on trade and very clearly the level of borrowing on farms all around the world, whether that is in New Zealand, America and Australia is quite high. You have a protected sector in Canada they have quotas and fixed prices, but in Europe post-quota you are going to be talking about volatility on price.”

He said the first issue is the capacity of farmers to borrow money and build the sheds to met European standards. “To build up a 200 cow herd in Ireland or anywhere in Europe is much more expensive than the same in US or Canada because they haven’t as nearer tighter environmental or animal welfare regulations requiring space per cow which are much greater than the required. but in particular the slurries.

“I was on several dairy units both in the US and in Canada where there idea of slurry storage was a slurry lagoon. But here in Ireland and the EU under the Nitrates Regulations they are very strict regulations of slurry storage, store build, which puts a huge extra cost per cow. The cost of increase is the infrastructure, then you have the herd, freeing up extra cows and that so finance will probably be the biggest challenge. We have had meetings with all the major banks where we have discussed with them the requirements. I think the banks have a good understanding of agriculture. They have an understanding of the financial requirements.”

He concluded from that point of view for a lot of farmers, it is putting a 10 to 12 year plan in place to take out loans to increase housing capacity, to increase stock. “The first big challenge will be finance.”

Post-quota diary and market volatility“The second challenge for dairy farmers and businesses post quota will be markets, markets for the extra product,” said Bryan. “For as the same time as quotas go across Europe, it is very clear the Danes, the Dutch, the Brittany part of France and parts of Germany will increase production, so you can allow for 2015/16/17/18 there is going to be a substantial increase in dairy production in European. At the same time depending on the milk price and grain price the US has plans for an increase in production there plans are based on prices coming down which they appear to be this year. Next year is another days work. If the milk grain prices come down there will be an increase in dairy production in the US.”

He predicted a gradual rise in diary product across Ireland, Denmark and Holland and the US in particular. “You can have volatility if too much comes together, if there is a gradual rise in the US, a gradual rise in Ireland, a gradual rise in Denmark and Holland. When you have a huge burst together you have a problem.”

He said because of the finance availability issues this will encourage Irish farmers to do it more gradual. “If a farmer is milking 80 cows he is not going to go to 160 in the morning. That is a fair step to go. So if its a gradual step programme over a couple of years, the market should absorb it,” he added.

The export dreamAccording to the President: “The two markets that should be able to take a lot of extra products is the Pacific Ring, you are talking about China, Singapore and Vietnam. There is a rising middle-class population there that is consuming more protein, more diary product, more meat, so that is a growing market. Also in North Africa and Sub-Saharan Africa.”

He predicted these are the two areas that there is going to be huge growth in population. “Between 2010 and 2030 the world population will increase by two billion. One billion of them are going to be Pacific Ring and the other in Africa. Neither of these areas have the capacity through water shortages to increase food production in line with increased food population. So there are great opportunities.”

He outlined Ireland’s many baby infant formula joint export ventures and the business opportunities. “For a small country Ireland has a substantial baby infant formula joint ventures, such as Diarygold, Kerry Group and Glanbia are working with ones with Chinese companies. By linking in with companies in those markets there are opportunities. I see no challenges with exporting. Milk production. Glanbia are going to build its powder plant. Lakelands already have there dryer so extra drying capacity will be made. Dairygold are also taking about building extra dryers. So these dryers reduce all the moisture out of it, bring it down all the packaging and that is very easy to transport.

“The distance between Ireland and China and New Zealand and China is not much greater but the markets we are taking about, for example Africa, Ireland is nearby and is one of the few countries in Europe without a huge population.”

He said a lot of countries in Europe such as Germany are net importers of dairy products. “But Ireland will always be a net exporter of dairy products and beef. And allow for the fact that we intend to increase production, Ireland is set to be the ideal country for dairy exports. If you were in China or were somewhere else and you wanted a partnership, Ireland is the ideal country where the product is not required on the domestic market, he added.

“To keep stability in European markets we are going to have to handle a lot of that product to both the African and Asian market. Exports is key and for exports to grow at the same time as production that is vital. And probably because Irish co-ops such as Kerry, Dairygold, Glanbia are use to exporting and probably better propositioned than some of the ones in Europe that are used to supplying the domestic market because they are already involved in those markets.”

The land availability challenge“Another issue that often comes up is land availability,” the IFA President added. “For some farmers in certain parts of the country they feel restricted about the amount of land they have. A lot of farmers throughout the country have a dairy herd and the a beef herd, maybe a grain enterprise. So a lot of those farmers will look at reduce the enterprise, look at reducing the beef enterprise, maybe reducing the grain enterprise, they may look at feeding more concentrates.”

He claimed post-quota farmers will be looking at every opportunity to improve production. “A quota regime where you had not the opportunity to increase production you didn’t look at all the boundaries but post quota you look at every opportunity, whether that is to feed more concentrates, whether it is to do a lot more reseeding.” He said all the indications so far show farmers are planning to expand and are already earmarked on numerous breeding improvement programmes.

“So there is opportunity in the production system to grow production and through concentrates and technology, maybe getting rid of less profitable enterprises on the farm should solve a lot of those areas.”

Is he worried about the increase in debt being carried by dairy farmers to expand?The IFA President said he is confident most famers will deal with their debt issue but has concerns regarding big intensive farmers. He explained: “The big problem with debt is if you get a really bad year, which 2012 was. Looking enough, it is nothing like 2009. 2009 was atrocious weather and bad prices. But what happened in 2012, the weather was bad and at the same time as the three major inputs feed, fuel, fertiliser rose substantially last year. And that increased debt across the board and usage of feed also substantially increased, yields were down a bit but again I would be reasonably confident that most of the farmers who are reasonably well developed if they get a stable year this year.”

He said milk yields were up in the past two months substantially he has no doubt Ireland will fill its quota this year. “Which we didn’t do last year and at a higher milk price, so that should work a good bit of that debt off.”

He raised concerns regarding very intensive farms and highlighted the work the IFA is doing with the banks. “At the other end of the scale, you have some very intensive farms that were heavily stocked on heavy lands. They ran up very heavy debts and they might not, might just, not clear them in one and a half years.

“We have met the banks on that and asked them to offered those farmers three years loans to restructure their debt and in most cases where a farmer has a viable operation, they are looking to facilitate something like that.”

The young guns“We always encourage young people into farming,” the IFA President said. “We believe young people are the life blood to bring new ideas and new vigour. Farming is a physical activity. There is a lot of manual work so young people with drive and ambition are very good. So we try through a combination on incentives such as tax breaks, stock relief and CAP improvements.”